Mr Sims says even selling produce for less than the cost of production isn't an issue, as long as existing supplier contracts are honoured and the discounts don't last so long that they damage other retailers.

While farm groups agree not all discounting is bad, they're concerned about how deep, long-term discounts on food may affect producers.

"I don't think any farmer would say no discounting at all, because there are times when farmers have an oversupply of product and they need to move that product and discounting can assist. So while we are concerned about discounting in one way, it does provide flexibility in another way," said Matt Linnegar, chief executive of the National Farmers' Federation.

"While cheaper prices for consumers are important when mums and dads are balancing their budgets, I'm sure they'd all like to see that they can continue to buy Australian food into the future. And if that's to be the case, then we need to have a system in place to make sure that both farmers and food processors can survive as well."

The ACCC has no power to rule on whether prices paid to farmers for their produce

"When it comes to the powers of the ACCC, and whether it's the ACCC or some other body or ombudsman, what we need to ensure is that the activities of those in the supply chain are going to have a detrimental impact on others in the supply chain, that needs to be addressed in some way," Mr Linnegar said.

"I'm not sure whether giving the ACCC the power to set prices is the answer. I think you'd need to have a long, hard look at that before you went down that path."

The federal minister with responsibility for competition law, Small Business Minister Bruce Billson, agrees that expanding the ACCC's powers to control farm gate prices would be a very big step.

"I'm not sure that having a regulator come in and set prices free of the normal commercial interactions that you'd expect in a fair and competitive economy to take place. I'm not sure that's good for the overall economy and I wonder where it might take us in the longer term in terms of business's preparedness to invest.

"What it leaves consumers in terms of a choice, that's a tough question.

"But that's one of the reasons we've set up the root and branch review [of competition law], to take a look at these issues."

Mr Billson says there are elements of existing legislation that already guard against predatory pricing.

"There are constraints on the extent of, and the way, discounting can be implemented, that guard against predatory pricing where discounting is used to wipe out competitors," he said.

"There's an issue there, and as we've revealed recently [with the now-disallowed supermarket shopper docket petrol discounts of more than 4 cents per litre] there's an issue with how those discounts are funded, if they're cross-subsidised from other areas of the business.

"They're areas of interest and ongoing concern, and the ACCC will be watching the behaviour of the supermarkets accordingly."

The Greens' competition spokesman, Tasmanian Senator Peter Whish-Wilson, agrees that giving the ACCC price setting powers at the farm gate would be a very big step, but he does want the review to at least take a look at the idea.

"It hasn't been looked at before because it isn't within the remit of the ACCC.

"I think the long-term way around it, apart from increasing competition in the supermarket sector, is helping farmers and primary producers have other access to other retail markets themselves, by developing their own brands and other ways they can directly sell their product to consumers," he said.

With Australian farmers also subject to the high expectations of the community regarding their chemical use and environmental stewardship, Senator Whish-Wilson says that consumers will also need to be better educated to understand the effect of those expectations on the cost of production in Australia.

"The only way to address that is with more information and better labelling laws. This doesn't just relate to rewarding farmers for the time and effort they put into environmental compliance, it has to be reflected in the branding of their products," he said.

"This is very important to differentiate Australian produce to imports coming in from overseas from countries that have very different environmental rules and regulations."

The terms of reference for the Federal Government's root and branch review of competition law should be finalised in the next few weeks, with the review due to be completed by the end of the year.